Drewry Air Freight Index - April gains erased in May

Monday, June 17, 2013

April's $0.06 uptick in east-west air freight rates evaporated in May, as the average rate per kilogram finished the month at $3.15, the same price as in March, according to Drewry's East-West Air Freight Price Index. Year-over-year, May's result represented a $0.10 drop in the price of air cargo.
The price index takes 21 trade lanes and averages them together, coming up with a weighted index and an average price for a kilogram of cargo.
The high point for freight in 2013 came at the beginning of the year, when rates for January and February averaged out to $3.25 and $3.32, respectively.

Sources: Drewry Sea & Air Shipper Insight.

Weak demand out of Asia is one of the culprits behind May's lackluster numbers, according to Drewry.
"The main airport hubs in Asia continue to report stronger export traffic figures although overall demand growth remains weak. Rising Asia outbound demand should feed into higher pricing. But this will be tempered by fast rising capacity growth, which is being driven by buoyant passenger demand," the company said in a statement.
Drewry expects Asia pricing to take a while to recover because this rising passenger growth means more cargo belly space, capacity that the industry isn't quite ready to absorb. The company does, however, foresee an increase in demand during the second half of the year, which should lead to an uptick in rates.
This generalization might not be felt by all carriers equally. While Cathay Pacific Airlines reported a 1.5-percent drop in cargo activity, year over year, in May, passenger activity nearly declined 1 percent. Cargo losses were driven by poor performance out of two of Cathay's main cargo markets, Hong Kong and Mainland China, according to officials, and cargo capacity declined by 0.1 percent, but is down 2.6 percent on the year.
“May is traditionally one of the quieter months for our passenger business. The H7N9 outbreak continued to dampen demand into Mainland China, particularly to destinations in the east of the country," Cathay's James Tong said in a statement. "Demand on long-haul routes — and London and the United States in particular — remained robust, though demand in the region again lagged capacity growth. One exception was the Japan route, where the yen depreciation helped to boost traffic out of Hong Kong.” - Jon Ross